The Billion Dollar Consumer Credit

Larry Ellison's spending worries his accountant

1) Life Style -- annual $20m

2) Interest Accrual -- annual $75m

3) Villa in Japan -- $25m

4) New Yacht -- $194m -- over 3 yrs

5) America's Cup -- $80m -- over 3 yrs

6) UAD -- 12m over 3 yrs.

It's not clear what UAD refers to. Since this rough budget, Ellison has reportedly spent $200 million building a Japanese-style estate in Woodside, which includes a reproduction of a 17th-century Kyoto teahouse. He has also bought multiple properties in Malibu -- $180 million worth, by one report.

Larry Ellison's financial adviser, Philip Simon, dated May 3, 2002:

I'm worried, Larry. ... I know you view me as a pessimist. Maybe you're right, though I would disagree. Nonetheless, I think it's imperative that we start to budget and plan. New purchases should be kept to a minimum. We need to establish and execute on a diversification game plan, to eliminate (yes, eliminate) all debt and build up a significant, conservatively structured, liquid investment portfolio. If this means sacrificing 30% of your current holdings in Oracle, so be it. With stock options and Oracle's share repurchases, your ownership percentage has been increasing somewhat over the last year or two.

I do not want you to end up like Carl Karcher, Wang, Bernie Ebbers, and the countless others. Yes, Oracle's a different company; no debt, real cash earnings, clean accounting. But, when the pendulum swings the other way, it can overshoot. PE multiples are driven by market (or should I say, mob) psychology. There's no science or logic in the short or medium term.

I know you don't like to discuss this. I know this e-mail may/will depress you. However, I believe it's my job to address issues you'd prefer not to confront. You told me years ago that it's OK to raise the 'diversification issue' with you quarterly. Well, I'm doing so. View this as a call to arms.

Can you believe that Larry Ellison's private and company financials differ tremendiously? Hmm, quite interesting, as Oracle's second most important product is a financial accounting package.